UBS Group AG upgraded its rating on bond insurance leader Assured Guaranty Ltd. (AGO) from "Neutral" to "Buy" on May 18, setting a price target of $94. The stock closed at $75.55 on Monday, implying a potential upside of approximately 24%.

Analyst Brian Meredith noted in the report that Assured Guaranty's current share price trades at a roughly 40% discount to its operating book value. This discount is deemed unwarranted given the company's market leadership in public finance bond insurance and its resilient earnings profile.

Assured Guaranty is described as the only major public finance bond insurer in the market, with its competitor Build America Mutual operating at a significantly smaller scale. UBS views the current share price level as an attractive entry point for this high-quality, strong cash flow business.

The report suggests recent stock price pressure stems from negative news related to Brightline and a slower share repurchase pace, leading to a disconnect between valuation and fundamentals. UBS believes the current valuation appears to price in approximately $1.5 billion in potential Brightline-related losses with almost no recovery expectations, a stance considered overly pessimistic.

Assured Guaranty's previously reported first-quarter results exceeded expectations, with adjusted earnings per share of $2.50, significantly above the analyst consensus of $1.42. Revenue reached $261 million, surpassing the expected $211.64 million.

CEO Dominic Frederico stated that new business production doubled year-over-year, with growth across all three segments: U.S. Public Finance, International Public Finance, and Global Structured Finance. The asset management business contributed $44 million in adjusted operating income, nearly four times the amount from the same period last year.

UBS's earnings per share forecast for Assured Guaranty for 2026 aligns with the market consensus, while its 2027 forecast is approximately 5% higher.